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Chapter 1: The challenge of the Future

The chapter starts with a discussion around Peter’s favorite interview question:

What important truth do very few people agree with you on?
 He says the question is challenging because it require respondents to :

• reflect and talk about knowledge they created for themselves (not taught in schools)
• to become socially unpopular by taking a different stance

He justify this approach by saying that brilliant thinking is rare but courage is in
even shorter supply than genius.

By continuing the argumentation around how hard it is to imagine something that

doesn’t exist and predict future solutions the authors propose the following graph to
differentiate progress as we see it today by creating a distinction between vertical
intensive progress (technology 0 →1) and horizontal extensive
progress (globalization 1 →n)

Why Start-ups?

Start-up = largest group of people you can convince of a plan to build a different
future.

Chapter 2: Party like it’s 1999

 Economical landscape of that period:

• 1990 — economical migration of investments in USA “ from bricks to clicks”

• 1997- Economical crash in Thailand
• 1999- Launch of the Euro
• 1998- 2000 — com mania

Paypal was founded in 1998 with the goal of creating a new internet currency to
replace the $ and managed to raise funds in 2000 right before the dot.com crash.

Chapter 3: All happy companies are different

All happy companies are different: each one earns a monopoly by solving a unique
problem. All failed companies are the same: they failed to escape competition.

Remember the first “contrarian” question, Peter next favorite question is:

What valuable company is nobody building?

Valuable company = Create value + Capture value.

The lesson for entrepreneurs? If you want to create and capture value don’t build
an undifferentiated commodity business

The author makes the difference between Monopoly vs Perfect competition and
explains how both this type of companies are trying to disguise themselves:
 Example disguise monopoly: Google has a monopoly on search but emphasizes the
small share of global online advertising.

Example disguise perfect competition: tries to find fake differentiators, “only British
restaurant in Palo Alto”.

Chapter 4: The ideology of competition

Description of American society obsession with competition.

Analogy of War and Peace ever present in business. MBA students carry around copies
of Clausewitz and Sun Tzu.

War metaphors in business language: headhunters, captive market, make a killing.

Why do people compete?

• Marx model = because they have different ideas and goals

• Shakespeare model = all combatants look more or less alike (ex: Montague vs Capulet)

War (in business like everywhere else) is destructive: while Microsoft and Google
were obsessed to compete with each other Apple came along and overtook them (500
billion $ Market capitalization Apple vs 467 billion $ Google + Microsoft)

Example of how far competition can go: Square copycats.

 Chapter 5: Last Mover Advantage

Value of business today = value of earnings in the future

Twitter vs New York Times

Twitter 24 bil $ valuation (2013 IPO) = 12 * NYT market cap

Wonder why?

• Twitter — holds monopoly of the future while publishing houses are loosing business
everyday
• Twitter had more cash flow.

Characteristics of a monopoly:

• Proprietary technology (10 times better than any existing solution)

• Network effect (start with a niche market)
• Economy of scale
• Excellent Branding

Building a monopoly:
• perfect target market for a startup is a small group of particular peopleconcentrated
together and served by few or no competitors.
• once you dominate a niche market expand to adjancent markets(always expand,
example amazon and ebay)
• don’t disrupt (act of creation is more important; ex: Paypal worked with Visa vs
Napster and Music Industry)
• the last will be the first, instead of first mover advantage make the last great
development in a specific market and reap the fruits of a mature ecosystem.

Chapter 6: You are not a lottery ticket

Question of the day: Can you control your future ?

If you treat the future as something definite it makes sense to understand it in advance
and to work to shape it. But if you expect and indefinite future ruled by randomness,
you’ll give up on trying to master it.

Example of amount of extra-curricular activities required to enter elite colleges and

making the argument that process trumps substance.

You can expect the future to be better or worse than the present and based on this
assumption the author draws the following graph:

• Indefinite pessimism: Europe since 1970s, today Eurozone in crisis, nobody is in

charge, don’t know when the crash will happen, enjoy life meanwhile = vacation mania
• Definite pessimism: from China perspective economic growth cannot come fast
enough, rich people try to take money outside, poor people prepare for the worst as
they know the current growth is not sustainable
• Definite optimism:Western world before 1970s (big plans that were executed:
Empire State building, Panama Canal, Apollo program.
• Indefinite optimism:finance eclipsed engineering as the way to approach the future,
Baby Boomers used to effortless progress, felt entitled to it.

Chapter 7: Follow the Money

Pareto principle or 80–20 rule: Vilfredo Pareto discovered that that 20% of people
owned 80% of the land in Italy.
 The power law becomes visible when you follow the money : in venture capital,
investors try to profit from exponential growth in early-stage companies, a few
companies attain exponentially greater value than all others.

Chapter 8: Secrets

Why aren’t people looking for secrets ?

Most people act as there are no secrets left to find. Example of geography.

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What happens when a company stops believing in secrets ?

Example of Hewlett-Packard :

• 1990 company worth 9 billion $

• 2000 after a decade of inventions (first affordable color printer, first super-portable
laptops) worth 135 billion $
• 2005 worth 70 billion $ (failed merge with Compaq, failed consulting/support shops)
• 2012 worth 23 billion $ as a result of abandoned search for technological secrets.

Example Fermat’s Last Theorem: after 358 years of fruitless inquiry by other
mathematicians was demonstrated by Andrew Wiles in 1995.

The best place to look for secrets is where no one else is looking

Example of nutrition where most of the policies were influenced by lobbyist and
scientific assessments and discoveries are yet still to be developed.

Chapter 9: Foundations

Beginnings are special. They are qualitatively different from all that comes afterward

Ownership, Foundation and control

• Ownership = who legally owns a company’s equity? (founders, employees, investors)

• Possession = who actually runs the company on a daily basis? (managers)
• Control = who formally governs the company affairs? (board of directors which
includes founders)

On the bus or off the bus: everyone should be involved full time

Cash is not king & Vested interests: startups don’t need to pay high salaries because
they can offer something better, part ownership of the company itself.

Equity can’t create perfect incentives, but it’s the best way for a founder to keep
everyone in the company broadly aligned.
Chapter 10: The Mechanics of Mafia

Recruiting Conspirators, Culture (Hoodies?), Do one thing, Build a cult

Chapter 11: If you build it, will they come?

Short answer: no.

Startups should care about sales just as much as they care about the product.The
distribution is the bottle neck for a business.

Primer on how to sell a product

CLV (Customer Lifetime Value) > CAC (Customer Acquire Cost)

The more expensive the product-> bigger sales costs-> more important to sale.

Look around, if you don’t see a salesperson, you’re the salesperson

 Chapter 12: Man and Machine

Complementarity human-machine vs robots will take our jobs

Globalization = substitution, Technology = complementarity.

Example Igor (Paypal) :

• mid 2000 Paypal was loosing 10 mil $/ month because of credit card fraud (impossible
to review thousands of transactions per minute)
• elite team mathematicians solve problem algorithmically
• fraudsters were learning and breaking the new rules fast
• solution: assemble a team of human analysts to review most suspicious
transactions flagged by the algorithm.
• This hybrid system was named “Igor” after the Russian fraudster who claimed he will
never be caught
• Paypal records first profit in 2002 vs quarterly loss of 29.3 mil $ one year before

This hybrid solution has been used by FBI for detecting fraud and later
inspired creation of Palantir.

Chapter 13: Seeing green

 Most cleantech companies crashed because they neglected one or more of the 7
questions every business should answer:

1. The Engineering question: Can you create breakthrough technology instead of

incremental improvements?
2. The Timing question: Is now the right time to start your particular business?
3. The monopoly question: Are starting with a big share from a small market?
4. The people question:Do you have the right team?
5. The distribution question: Do you have a way to deliver your product?
6. The durability question: Will your market position be defensible 10 and 20 years
into the future?
7. The secret question:Have you identified an unique opportunity that others don’t see?

About Social Business: hundreds of undifferentiated products all in the name of one
over-broad good.

Corporate Green = NGO Goodness

Challenge for entrepreneurs to create Energy 2.0 is to think small.

Chapter 14: The Founders Paradox

Founders are important not because they are the only ones who’s work has value, but
rather because a great founder can bring out the best work from everybody at
his company

People distribution of traits vs Founders distribution of traits

The lesson for founders is that individual prominence and adulation can be exchanged
for individual notoriety and demonization at any moment
 The greatest danger for a founder is to become so certain of his own myth that he loses his
mind. But an equally insidious danger for every business is to lose all sense of myth and
mistake disenchantment for wisdom.

Conclusion: Stagnation or Singularity?

Short answer: it depends on us.

Four scenarios for the future:

• recurrent collapse
• plateau
• extinction
• takeoff

Whether we achieve the Singularity on a cosmic scale is perhaps less important than
whether we seize the unique opportunities we have to do new things in our own
working lives.

The essential first step is to think for yourself. Only by seeing our world anew, as fresh and
as strange as it was to the ancients who saw it at first, can we both re-create it and
preserve it for the future.
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